Choosing a legal business structure is one of the most important decisions you will make as an entrepreneur or freelancer. Many people start businesses all by themselves, without a partner, and depending on the state laws, there are a variety of solo business entities that can be operated by one person.
A sole proprietorship (SP) is the easiest business type to set up; you don’t have to do anything to get started. Sole proprietorships are unincorporated businesses operated by one person for profit. Without a formal business entity, the company and the person are one and the same, and the owner is personally liable for any debts and obligations incurred by the business. Although most states do not require an SP to register with the government, it is a good practice to register your company with your local jurisdiction, choose a name, and pay a small fee, and set up shop. If you decide to operate as a sole proprietorship, you should weigh the ease of business setup with the potential risk of personal liability.
A solo practice is operated by a licensed professional such as an attorney, a doctor, or an accountant. While a solo practice does not have any partners, it can include support staff such as administrative assistants, nurses, paralegals, and other professionals. A solo practice can be a sole proprietorship but often chooses to formalize as another business entity, such as a limited liability company (LLC), a corporation (C), or a professional limited liability company (PLLC). There are advantages and disadvantages to each of the types of formal business structures, but the major advantages are the avoidance of double tax obligations and the protection of your personal assets.
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Many freelancers, such as writers, musicians, designers, artists, etc., start off as sole proprietors, but later may formalize their business and protect their personal assets by eventually setting up some type of corporation. It is also illegal to commingle your business finances with your personal finances. It is always recommended to consult with an attorney and an accountant as you set up your company.
The professionals at Your Business Your Brand Creatively work with entrepreneurs, freelancers, and solo professionals on various branding, marketing, business communication, and social media projects. Please contact us and we would be happy to work with you.
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